Trade E-Silver National Spot Exchange (NSEL): Commodity Trading

There is some good news for the traders and investors who wish to bet their money on precious metal commodities. The National Spot Exchange of India has come out with a good product called E-Silver through which small investors as well as big investors can trade Silver on the NSEL. In this article, we will cover details about what is E-Silver, how it can be traded and what are the benefits of trading E-Silver as a commodity product.

Trading Silver as Commodity through E-Silver

Let's start with the basics first.
What is E-Silver?

E-Silver is a trading and investment product which is offerd by National Spot Exchange of India and aimed at offering trading as well as investment opportunities to small investors as this product can be traded with small amounts of money.
Till now, Precious commodities like Gold and Silver were being traded only in large quantities, so they were out of reach of common man or better to say small investors who wished to trade these commodities. Although Gold can be traded in small amounts through Gold based ETF's - see details, there was no similar product for trading silver. Now, through E-Silver, small traders and investors can bet their money on Silver prices and attempt to benefit from Silver trading.

What will be underlying the E-Silver as a product? How will E-silver trading work
This is the crux of silver trading. Silver can be traded through E-Silver in small quantities - like 100 grams and its multiples. So 1 unit of E-Silver will be the cost of 100 grams of Physical silver, as available in the market (around 2750 Rs. as of now). So this will allow small investors who can trade silver in small amounts.
Similar product called E-Gold which was launched by NSEL in March 2010 has also been a good success.

Why is E-Silver introduced?
Riding high on the success of E-Gold, the National Spot Exchange has offered similar product for Silver.
As we all know, silver prices in the recent past have given excellent returns. However, small investors have always been left out as there is no silver based ETF available for trading in India or any other silver based product suitable for trading and investing in silver in small amounts.
NSEL is trying to offer a silver based product so that small investors can also trade on silver prices.
Morever, this can also bring in a kind of uniformity in prices across the country, as silver prices will now be available (and can be referred benchmarked) against the E-Silver product prices, as trading goes on on NSEL. Irrespective of whether the silver trader is in Delhi or Kanyakumari, he will get the same price of silver across the geography.

How will E-Silver trading happen?
The price of E-Silver units will be in multiples of 10 paisa ticks.
Trading day will be for a long period - 10 AM to 1130 PM.
Settlement Cyce will be T+2

What are the risks involved in trading E-Silver?
Of course there is the risk of price movements. You may have a BUY position and then the price starts to go down, or vice versa, you will be in a loss.
Dont just go by the historical price rise. Market works randomly and what has been going up till now can start falling down. See Historical Performace of Gold ETF and how it has varied over long periods of time.
Also note that it will be a 13:30 hr long trading day. So from a trader's perspective, it will be a really long day and one will be required to keep close eye on his silver positions for long periods of time. Also note that Sivler prices are decided internationally.
Then, NSEL or National Spot Exchange is a relatively new exchange. Not all brokers provide trading in NSEL. So investors or traders who wish to bet their money on E-Silver, might have to spend money on opening accounts with the brokers who offer NSEL trading.
Transaction costs will again be another thing to look at and it will vary from broker to broker.